Beruflich Dokumente
Kultur Dokumente
A. EXCISE
AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944 (1) 2012) Incorporation of definition of inter-connected undertakings in section 4 (Effective from May 28th,
Section 4 deals with the determination of value of excisable goods chargeable to duty on ad valorem basis. It has been amended to incorporate the definition of inter-connected undertakings contained in Monopolies and Restrictive Trade Practices Act, 1969 as the latter has been repealed. In the Central Excise Act, 1944, in section 4,in sub-section (3), in clause (b), dealing with related party, in the Explanation, for clause (i) providing the meaning of inter-connected undertakings, the following clause has been substituted, namely: (i) "inter-connected undertakings" means two or more undertakings which are inter- connected with each other in any of the following manners, namely: (A) if one owns or controls the other;
(B) where the undertakings are owned by firms, if such firms have one or more common partners; (C) where the undertakings are owned by bodies corporate, (I) (II) (III) (IV) if one body corporate manages the other body corporate; or if one body corporate is a subsidiary of the other body corporate; or if the bodies corporate are under the same management; or if one body corporate exercises control over the other body corporate in any other manner;
(D) where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firm, (I) hold, directly or indirectly, not less than fifty per cent. of the shares, whether preference or equity, of the body corporate; or (II) exercise control, directly or indirectly, whether as director or otherwise, over the body corporate; (E) if one is owned by a body corporate and the other is owned by a firm having bodies corporate as its partners, if such bodies corporate are under the same management; (F) if the undertakings are owned or controlled by the same person or by the same group; (G) if one is connected with the other either directly or through any number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub clauses. (2) Section 9-Offences and Penalties amended (Effective from May 28th, 2012) As per the existing provisions of section 9(1)(i), any person who commits any of the offences specified therein, will be imprisoned for a term extendible upto seven years and with fine. However, penal provisions are applicable in case of offences relating to any excisable goods wherein the duty leviable thereon exceeds ` 1,00,000 . The Finance Act, 2012 has amended section 9(1)(i) to the effect that such penal provisions will now apply in the case of an offence relating to any excisable goods, in which the duty leviable thereon under this Act exceeds thirty lakh of rupees. Hence, now the offence relating to any excisable goods, in which the duty leviable thereon under this Act exceeds thirty lakh of rupees, is punishable with imprisonment for a term which may extend to seven years and with fine . (3) Section 11A- Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded, amended (Effective from May 28th, 2012) (i) Before Amendment Where, during the course of any audit, investigation or verification, it is found that any duty has not been levied or paid or short-levied or short-paid or erroneously refunded for the reason mentioned in clause (a) or clause (b) or clause (c) or clause (d) or clause (e) of sub-section (4) but the details relating to the
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(1) The amount of penalty for non-levy or short-levy or non-payment or short payment or erroneous refund shall be as follows: (a) where any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined; (b) where details of any transaction available in the specified records, reveal that any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded as referred to in sub-section (5) of section 11A, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to fifty per cent of the duty so determined; (i) After Amendment (1) The amount of penalty for non-levy or short-levy or non-payment or short payment or erroneous refund shall be as follows: (a) where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined; (b) where details of any transaction available in the specified records, reveal that any duty of excise has not been levied or paid or has been short- levied or short-paid or erroneously refunded as referred to in sub- section (5) of section 11A, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to fifty per cent of the duty so determined; (ii) Section 11AC provides for reduced penalty if the duty along with interest is paid within 30 days of the communication of the order. It has been amended to make available the benefit of reduced penalty only if the reduced penalty is also paid within the specified period of thirty days. Section 12F-Power of search and seizure, amended (Effective from May 28th, 2012)
(5)
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B.
SERVICE TAX
AMENDMENTS IN CHAPTER V AND VA OF THE FINANCE ACT, 1994 (1) Section 65 dealing with definitions ceased to apply (Effective from July 1, 2012) Section 65 of the Act deals with definitions of all taxable services as well as various other terms relating to services. A Proviso has been newly inserted in section 65 which provides that the provisions of this section will cease to apply with effect from July 1, 2012. (2) Section 65B newly inserted which deals with definitions (Effective from July 1, 2012) A new section 65B has been inserted so as to define the following expression. Hence, from now onwards definitions will be dealt by newly inserted section 65B instead of section 65. In this Chapter, unless the context otherwise requires, (1) "actionable claim" shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882. "actionable claim" means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. [Section 3 of the Transfer of Property Act, 1882.] (2) "advertisement" means any form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person. (3) "agriculture" means the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products. (4) "agricultural extension" means application of scientific research and knowledge to agricultural practices through farmer education or training. (5) "agricultural produce" means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. (6) "Agricultural Produce Marketing Committee or Board" means any committee or board constituted under a State law for the time being in force for the purpose of regulating the marketing of agricultural produce. (7) "aircraft" has the meaning assigned to it in clause (1) of section 2 of the Aircraft Act,1934. "aircraft" means any machine which can derive support in the atmosphere from reactions of the air, [other than reactions of the air against the earth's surface] and includes balloons, whether fixed or free, airships, kites, gliders and flying machines. [Section 2(1) of the Aircraft Act,1934.] (8) "airport" has the meaning assigned to it in clause (b) of section 2 of the Airports Authority of India Act, 1994. airport means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934. [Section 2(b) of the Airports Authority of India Act, 1994.]
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(20)"courier agency" means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or
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(b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976; (c) the seabed and the subsoil underlying the territorial waters; (d) the air space above its territory and territorial waters; and (e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. (28)"information technology software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment. (29)"inland waterway" means national waterways as defined in clause (h) of section 2 of the Inland Waterways Authority of India Act, 1985 or other waterway on any inland water, as defined in clause (b) of section 2 of the Inland Vessels Act, 1917. (30)"interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred ( including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. (31)"local authority" means(a) a Panchayat as referred to in clause (d) of article 243 of the Constitution; (b) a Municipality as referred to in clause (e) of article 243P of the Constitution; (c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
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(x) every artificial juridical person, not falling within any of the preceding sub- clauses. (38)"port" has the meaning assigned to it in clause (q) of section 2 of the Major Port Trusts Act,1963 or in clause (4) of section 3 of the Indian Ports Act, 1908. "port" includes also any part of a river or channel in which the Indian Ports Act is for the time being in force. [Section 3(4) of the Indian Ports Act, 1908.] "port" means any major port to which the Major Port Trusts Act applies within such limits as may, from time to time, be defined by the Central Government for the purposes of this Act by notification in the Official Gazette, and, until a notification is so issued, within such limits as may have been defined by the Central Government under the provisions of the Indian Ports Act.[ Section 2(q) of the Major Port Trusts Act,1963] (39)"prescribed" means prescribed by rules made under this Chapter. (40)"process amounting to manufacture or production of goods" means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force. (41)"renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the
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(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. (45)"Special Economic Zone" has the meaning assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005. "Special Economic Zone" means each Special Economic Zone notified under the proviso to sub-section (4) of section 3 and sub-section (1) of section 4 of the Special Economic Zones Act, 2005 (including Free Trade and Warehousing Zone) and includes an existing Special Economic Zone. [Section 2(za) of the Special Economic Zones Act, 2005.] (46)"stage carriage" shall have the meaning assigned to it in clause (40) of section 2 of the Motor Vehicles Act, 1988. "stage carriage" means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey. [Section 2(40) of the Motor Vehicles Act, 1988.] (47)"State Electricity Board" means the Board constituted under section 5 of the Electricity (Supply) Act, 1948.
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Section 66E: Declared services Section 66F: Bundled services (6) Section 66C, Determination of place of provision of service (Effective from July 1, 2012) For determination of Place of provision of service, the Place of Provision of Service Rules, 2012 have
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Provisions of Section 66C (1) Sub section 1 of Section 66C empowers the Central Government to make rules to determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided having regard to the nature and description of various services. (2) Any rule made under sub-section (1) will not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. (7) Introduction of Negative List Approach (Effective from July 1, 2012) Service tax was introduced in the year 1994 on three services. India adopted the selective approach for taxing services. Under this approach selected services are made liable to tax. Every Budget new services were added taking the toll to more than 120 services from the modest beginning of 3 services in 1994. However, the selective approach lead to grave classification issues and made the law very complex. Considering these increasing complexities, the Government has now decided to adopt the comprehensive approach of taxing services. For this purpose, the Finance Minister in this year s budget has introduced the negative list of services. However, the negative list of services is not merely a revenue garnering measure but it aims to widen the tax base of services and simultaneous simplification of the law. A Negative List approach to taxation of services has been introduced vide new sections, namely, 66B, 66C, 66D, 66E and 66F in Chapter V of the Finance Act. The services specified in the Negative List (section 66D) will remain outside the tax net. All other services, except those specifically exempted by the exercise of powers under section 93(1) of the Finance Act, 1994, would thus be chargeable to service tax. Negative List of Services, Section 66D Section 66D has been newly inserted which specify the following list of services as the negative list: (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere (i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government. (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport. (iii) transport of goods or passengers or (iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities. (b) services by the Reserve Bank of India. (c) (d) services by a foreign diplomatic mission located in India. services relating to agriculture or agricultural produce by way of
(i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing. (ii) supply of farm labour.
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Section 66E has been newly inserted which specify that the nine specific activities or transactions are declared to be covered as service. Such activities includes: (a) renting of immovable property (b) (c) construction of a complex.* temporary transfer or permitting the use or enjoyment of any intellectual property right
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(f) transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods (g) activities in relation to delivery of goods on hire purchase or any system of payment by instalments (h) service portion in the execution of a works contract (i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity * Construction of a complex Service to include: construction of a complex, building civil structure or a part thereof including a complex or building
intended for sale to a buyer, wholly or partly, except the cases where the entire consideration is received after issuance of completion-certificate by the competent authority. Taxability of Service-The New Equation Service = Activity + Consideration + Person + Declared Service Negative List = Taxable Service Exempted Services + Place of Provision in Taxable Territory = Taxability (9) Section 65A dealing with Classification of services rescinded (Effective from July 1, 2012)
Section 65A of the Act deals with classification of taxable services. A new sub-section has been inserted in section 65A which provides that the provisions of this section will cease to apply with effect from July 1, 2012. (10) Section 66F newly inserted-Principles of interpretation of specified descriptions of services or bundled services (Effective from July 1, 2012) Section 66F has been newly inserted vide Finance Act, 2012 which specify the principles of interpretation of specified descriptions of services or bundled services. Provisions of Section 66F Reference to main service
Section 66F specifies that whenever reference to main service is made , it will not include reference to a service which is used for providing main service.[Sub-section (1)]
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Where a service is capable of differential treatment for any purpose based on its description, the most specific description will be preferred over a more general description.[Sub-section (2)] The taxability of a bundled service is determined in the following manner, namely: (a) Naturally Bundled-Essential character principle
If various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character. (b) Not Naturally Bundled Highest liability Principle If various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. {[Sub-section (3)] Meaning of "Bundled service" "Bundled service" means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.} (11) Section 67A newly inserted- Date of determination of rate of tax, value of taxable service and rate of exchange (Effective from May 28, 2012) Section 67A has been newly inserted by the Finance Act, 2012 which specify that the rate of service tax, value of a taxable service and rate of exchange will be the one as in force or as applicable at the time when the taxable service has been provided or agreed to be provided. (12)Section 68, Payment of service tax (Effective from July 1, 2012) Before Amendment Section 68 provides as follows:(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. [Sub-Section (1)] (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. [Sub-Section (2)] After Amendment made, NEW REVERSE CHARGE MECHANISM Sub- section (2) of Section 68 has now been amended providing that for the words "any taxable service notified", the words "such taxable services as may be notified" will be substituted. Prior to the amendment, in respect of certain notified services service tax is to be paid by the recipient of taxable service. With effect from 1.7.2012, a new scheme of taxation has been brought into effect whereby the liability of payment of service tax will be both on the service provider and the service recipient. Usually such liability is affixed either on the service provider or the service recipient, but in specified services and in specified conditions, such liability will be on both the service provider and the service recipient. The enabling provision has been provided by insertion of proviso to section 68 in the Finance Act, 2012 as per which Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of Chapter V shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider. Under this clause, the Central government has issued Notification no. 30/2012 dated 20.6.2012 notifying the description of specified services when provided in the manner so specified where part of the service tax has to be paid by the service receiver. The extent to which tax liability has to be discharged by the service receiver has also been specified in the said notification.
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(13)
Section 72A, newly inserted-Special Audit (Effective from May 28, 2012)
Till 27 th May, 2012,Special audit for CENVAT credit purposes under section 14AA was applicable to service tax vide section 83.Section 83 of Finance Act 1994 deals with applicability of provisions of the Central Excise Act,1944 to service tax. However, now a separate section has been inserted in service tax law itself vide enactment of Finance Act, 2012. A new section 72A has been inserted vide Finance Act, 2012 to introduce provisions relating to special audit in the service tax law on the lines of section 14A and section 14AA of the Central Excise Act, 1944.Consequently, section 14AA has been omitted from section 83. 1. Section 72A provides for a special audit to be carried out by a chartered accountant or cost accountant nominated by the Commissioner of Central Excise. 2. The special audit would be ordered where the service tax assessee has failed to declare or determine the value of taxable service correctly or has availed and utilised credit of duty or tax beyond the normal limit having regard to the nature of taxable service provided, the extent of capital goods used or the type of inputs or input services used, or any other relevant factors as he may deem appropriate or by means of, collusion or wilful mis-statement or 3. he is having operations spread out in multiple locations and it is not possible or practicable to obtain a true and complete picture of his accounts from the registered premises falling under the jurisdiction of the commissioner. 4. The audit report is to be submitted by the chartered accountant or the cost accountant to the Commissioner on completion of the audit . 5. other law . Such audit may be ordered even though such accounts had been audited under any
6. Before initiating proceedings on the basis of the report, a reasonable opportunity is given to the service tax assessee so audited to present his stand. (14)Section 73 amended- Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded (Effective from May 28, 2012) Section 73 has now been amended providing for the following(1) The one-year time limit for issuance of notice for specified category of offences prescribed under section 73(1) of the Finance Act, 1994, has been increased to eighteen months. (i) Deemed Notice A new sub-section (1A) has been inserted in section 73 of the Finance Act, 1994 to prescribe that notwithstanding anything contained in sub-section (1), follow-on notices issued on the same grounds need not repeat the grounds but only state the amount of service tax chargeable for the subsequent period. Statement of tax due for the subsequent period, served on the assessee with reference to the earlier demand notice, will be deemed as a notice under section 73(1) of the Finance Act, 1994. (ii) Prior to 28.05.2012, wherever sub-section 4A applies, sub-section(3) dealing with waiver of notice in case service tax is paid before issuance of notice by CEO and sub-section (4) dealing with non-payment of service tax in case of fraud etc did not apply. However, now in case of sub-section (4A), only sub-section (4) will not apply. (iii) The time limit for serving the deemed notice for recovery of service tax will be eighteen months. (15)Section 80 amended- cases in which penalty is not imposed (Effective from May 28, 2012) A new sub-section has been inserted in section 80 which provides that no penalty would be imposed on
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(16)Section 83 amended- Applicability of provisions of the Central Excise Act, 1944 to service tax (Effective from May 28, 2012) Section 83 has been amended now whereby following additional provisions of Central Excise Act, 1944 are made applicable to Service Tax. Section of the CE Act, 1944 31 32 32A to 32P 35EE Settlement Commission Revision by Central Government Particulars
Subsequently, reference to Section 14AA is omitted since the said provisions are now contained in newly introduced Section 72A. (17)Section 85 amended- Appeals to the Commissioner of Central Excise (Appeals) (Effective from May 28, 2012) Section 85 has been amended now whereby the time limit for filing appeal with Commissioner of Central Excise (Appeals) has been reduced to 2 months from 3 months. The revised time limit would be applicable in respect of decision or order passed on or after 28.05.2012. Also, the Commissioner of Central Excise (Appeals) is empowered to condone the delay upto the period of 1 month as against the erstwhile period of 3 months. (18) Section 86 amended-Appeals to the Appellate Tribunal (Effective from May 28, 2012) Section 86 has been amended to provide for the period of limitation for filing appeal before the Tribunal as four months from the date of receipt of order by the Committee of Chief Commissioners or Committee of Commissioners. Earlier, the period of limitation was three months. The extended period of limitation is applicable for all decisions or orders passed after 28.05.2012. The time limit for filing appeal by the assessee to the Appellate Tribunal still remains the same that is within three months of the date on which the order sought to be appealed against is received by the assessee. (19) Section 88 rectified- liability under Act to be first charge (Effective from May 28, 2012) Section 88 provides that any amount of duty , penalty, interest, or any other sum payable by an assessee subject to certain Acts be the first charge on the property of the assessee. However, now in place of the word duty , the word tax has been substituted. (20)Section 89 amended- Offences and Penalties (Effective from May 28, 2012) Section 89 was inserted by Finance Act, 2011 to provide for offences and penalties to enable prosecution of specified offences involving service tax evasion. As per Section 89(1)(a), provision/receipt of any taxable service without an invoice issued in accordance with the provisions was considered to be an offence. The said Section 89(1)(a) has been substituted so as to prescribe knowingly evasion of payment of service tax as an offence. Thus with the introduction of new clause, the scope of punishable offence has been widened. (21) Section 93A amended- Power to grant rebate (Effective from May 28, 2012) Prior to Finance Act 2012, the Central Government was empowered to grant rebate of service tax in case
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AMENDMENTS IN THE CUSTOMS ACT, 1962 (1). Definition of customs airport amended in section 2 (Effective from May 28th, 2012) The definition of customs airport has been amended to include air freight stations in the definition of customs airport. Before Amendment customs airport means any airport appointed under (a) of section 7 to be a customs airport; After Amendment customs airport means any airport appointed under (a) of section 7 to be a customs airport and includes a place appointed under clause (aa) of that section to be an air freight station; (2) Section 7 Appointment of customs ports, airports, etc. amended (Effective from May 28th, 2012) Section 7 has been amended to empower the Central Board of Excise and Customs to appoint air freight stations for unloading of import cargo and loading of export cargo as in the case of Inland Container Depots. Section 7 of the Customs Act, 1962 inter alia empowers the Board to appoint by notification in the Official Gazette: (a) inland container depots, for the unloading of imported goods and the loading of export goods or any class of such goods, After Amendment (a) inland container depots or air freight stations, for the unloading of imported goods and the loading of export goods or any class of such goods, (3) Insertion of new section 28AAA-Recovery of duties in certain cases (Effective from May 28th, 2012)
Reason for insertion of new section 28AAAThe provisions of the Customs Act enable recovery of duty not-levied, or short-levied by reason of collusion, or willful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter. Certain cases have been detected relating to utilization of instruments, such as duty credit scrips, where the instrument was obtained by means of collusion or wilful mis-statement or suppression of facts by the person to whom the instrument was issued or his agent or employee and not by the importer who utilized it. A new section 28AAA has been inserted to provide for recovery of duties, from the person to whom the instrument was issued without prejudice to any action that may be taken against the importer. After section 28AA of the Customs Act, the section 28AAA has been inserted, providing for: Provisions of Section 28AAA (1) (a) (b) (c) Where an instrument issued to a person has been obtained by him by means of collusion; or wilful misstatement; or suppression of facts,
for the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992, by such person or his agent or employee and such instrument is utilised under the provisions of this Act or the rules made or notifications issued thereunder, by a person other than the person to whom the instrument was issued, the duty relatable to such utilisation of instrument shall be deemed never to have been exempted or debited and such duty shall be recovered from the person to whom the said
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****************************************************************************************************************** SIGNIFICANT AMENDMENTS MADE THROUGH NOTIFICATIONS/ CIRCULARS ISSUED BETWEEN 01.07.2011 TO 30.06.2012 A. I. EXCISE AMENDMENTS IN THE CENVAT CREDIT RULES, 2004
A large number of amendments have been made in the CENVAT Credit Rules, 2004 vide various notifications issued in the period between March and June. Some of these amendments are applicable from 1 st April, some from 1 st July while others are applicable from the date of issue of notification. Hence, the date of applicability of the CENVAT amendments in the following amendments has not been mentioned with a view not to confuse the students. 1. Definition of capital goods amended [Rule 2(a)]
Amended definition of capital goods (with amendments given in the italics) is as follows:Capital goods means :(A) the following goods, namely :(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act; (ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
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(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for(i) providing an output service of renting of such motor vehicle; or (ii) transportation of inputs and capital goods used for providing an output service; or (iii) providing an output service of courier agency. (C) motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for providing output service of(i) transportation of passengers; or (ii) renting of such motor vehicle; or (iii) imparting motor driving skills. (D) components, spares and accessories of motor vehicles which are capital goods for the assessee. [Notification No. 18/2012-CE (NT) dated 17.03.2012 as amended by Notification No. 28/2012 CE (NT) dated 20.06.2012] 2. Definition of exempted goods under rule 2(d) and proviso to rule 3(1)(i) amended [Notification No. 21/2012 CE (N.T.) dated 27.03.2012] The definition of exempted goods under rule 2(d) has been amended to include goods in respect of which exemption under entries at serial numbers 67 and 128* of Notification No. 12/2012-CE dated 17.03.2012 is availed. Further, proviso to rule 3(1)(i) has also been accordingly amended to provide that CENVAT credit of excise duty paid on aforementioned goods shall not be available. 3. New definition of exempted services [Rule 2(e)] [Notification No. 28/2012-CE (NT) dated 20.06.2012] The definition of the exempted services has been aligned with the negative list approach of taxation of services. Thus, clause (e) of rule 2 has been substituted with the following clause:Exempted service means a(1) taxable service which is exempt from the whole of the service tax leviable thereon; or (2) service, on which no service tax is leviable under section 66B of the Finance Act; or (3) taxable service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken; but shall not include a service which is exported in terms of rule 6A of the Service Tax Rules, 1994.
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5. Definition of input service amended [Rule 2(l)] (a) Exclusion Clause (B) Before Amendment Earlier, following services were not eligible as input service if they relate to a motor vehicle which is NOT a capital goods:General insurance business Rent-a-cab scheme operator s services Service Stations services Supply of tangible goods services Hence, the aforesaid services were eligible as input services if they were used for providing specified taxable services for which the credit on motor vehicle was available as capital goods. After Amendment The exclusion clause (B) has been substituted by clause (B) and (BA) which provide as follows:(i) Services provided by way of renting of a motor vehicle where such motor vehicle is not a capital good are excluded from the definition of the input service [Clause (B)] Implication It implies that the credit of the service tax paid on hiring of the motor vehicles, which are eligible as capital goods, is available. (ii) Service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle where such motor vehicle is not a capital good are excluded from the definition of the input service [Clause (BA)]
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However, if any of the said specified services are used for provision of one or more of these specified services, they shall be eligible as input services. After Amendment Following services would not be eligible as input services if they are used for construction or execution of works contract of a building or a civil structure or a part thereof; or laying of foundation or making of structures for support of capital goods:(i) Service portion in the execution of a works contract (ii) Construction service as listed under section 66E(b) of the Act.
However, if works contract services are used for provision of construction services, or vice versa, they shall be eligible as input services. (c) For the words, taxable service in the said defintion, the words output servic e have been substituted. [Notification No. 18/2012-CE (NT) dated 17.03.2012 as amended by Notification No. 21/2012 CE (NT) dated 27.03.2012 & Notification No. 28/2012-CE (NT) dated 20.06.2012]
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(a) CENVAT credit of the service tax leviable under new charging section 66B available Since, with effect from 01.07.2012, service tax under negative list approach is leviable under new charging section 66B, it has been provided that a manufacturer or producer of final products or a provider of output service is allowed to take CENVAT credit of the service tax leviable under section 66B of the Finance Act [Clause (ixb) to rule 3(1) inserted]. [Notification No. 28/2012-CE (NT) dated 20.06.2012] (b) Service receiver cannot utilize the CENVAT credit
CENVAT credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient [Explanation to rule 3(4) inserted]. (c) Amount payable on capital goods removed after being used as capital goods or as scrap or waste [Third proviso to 3(5) and rule 3(5A)] After Amendment:If the capital goods are removed after being used, whether as capital goods or as scrap or waste, the manufacturer/provider of output services shall pay an amount equal to:(I) CENVAT Credit taken on the said capital goods reduced by the percentage points** calculated by straight line method for each quarter of a year or part thereof from the date of taking the CEVAT Credit. Or (II) Duty leviable on transaction value. whichever is higher. (d) [Notification No. 18/2012-CE (NT) dated 17.03.2012] Other changes
(i) In sub-rule (1), for the words, provider of taxable service, wherever they occur, the word provider of output service have been substituted. (ii) In the proviso to sub-rule (5B), for the words taxable services the words output services have been substituted. 8. Credit of capital goods and inputs to be allowed to service provider without bringing them into premises subject to due documentation [Second proviso to rule 4(1) and fourth proviso to rule 4(2)(a) inserted] Before Amendment Earlier, credit on capital goods and inputs could be taken only after they were brought to the premises of the service provider.
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Refund scheme prescribed under rule 5 has been simplified to a larger extent by substituting with a new rule. The new scheme does not require a direct correlation between exports and input services/inputs used in such exports. Duties or taxes paid on any goods or services that qualify as inputs/input services will be entitled to be refunded in the ratio of the export turnover to total turnover. The scheme is as under:A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or a service provider who provides an output service which is exported without payment of service tax, shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: Refund amount is as follows:[(Export turnover of goods +Export turnover of service)x Net CENVAT credit] / Total turnover However, the refund may be claimed under the erstwhile rule 5 till 31.03.2013. Further, no refund of credit shall be allowed if the manufacturer or provider of output service avails the drawback allowed under the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995, or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claims rebate of service tax under the Service Tax Rules, 1994 in respect of such tax. Value of services For the purposes of this rule, the value of services shall be determined in the same manner as the value for the purposes of sub-rule (3) and (3A) of rule 6 is determined. [Notification No. 18/2012-CE (NT) dated 17.03.2012 as amended by Notification No. 28/2012-ST dated 20.06.2012] In exercise of power conferred by aforesaid rule, CBEC, vide Notification No. 27/2012- CE (NT) dated 18.06.2012 provides that refund of CENVAT credit shall be allowed subject to the procedure, safeguards, conditions and limitations as specified below, namely:A. Safeguards, conditions and limitations
(a) The manufacturer or provider of output service shall submit not more than one claim of refund under this rule for every quarter. However, a person exporting goods and service simultaneously, may submit two refund claims one in
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(e) In respect of the services, for the purpose of computation of total turnover, the value of export services shall be determined in accordance with clause (D) of sub-rule (1) of rule 5 of the said rules. (f) For the value of all services other than export during the quarter, the time of provision of services shall be determined as per the provisions of the Point of Taxation Rules, 2011. (g) The amount of refund claimed shall not be more than the amount lying in balance at the end of quarter for which refund claim is being made or at the time of filing of the refund claim, whichever is less. (h) The amount that is claimed as refund under rule 5 of the said rules shall be debited by the claimant from his CENVAT credit account at the time of making the claim. (i) In case the amount of refund sanctioned is less than the amount of refund claimed, then the claimant may take back the credit of the difference between the amount claimed and amount sanctioned. B. Procedure for filing the refund claim 1. The manufacturer/provider of output service shall submit a duly signed application in Form A to the jurisdictional Assistant Commissioner/Deputy Commissioner of Central Excise (AC/DC) along with the specified documents and enclosures before the expiry of the period specified in section 11B of the Central Excise Act. The refund claim shall be accompanied by the copies of bank realization certificate and a certificate duly signed by the auditor certifying the correctness of refund claimed in respect of export of services. AC/DC, after satisfying himself in respect of the correctness of the claim and the fact that goods cleared for export or services provided have actually been exported, shall allow the refund claim in full or part.
2.
3.
10. Refund of CENVAT credit to service providers providing services taxed on reverse charge basis [New rule 5B inserted] A provider of service providing services notified under sub-section (2) of section 68 of the Finance Act (services taxed on reverse charge basis) and being unable to utilise the CENVAT credit availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of such unutilised CENVAT credit subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette.
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In clause (iva) and clause (vii), reference to Notification No. 6/2006-CE dated 01.03.2006 has been substituted with Notification No. 12/2012-CE dated 17.03.2012 because the former notification has been superseded by the latter one. [Notification No. 25/2012-CE (NT) dated 08.05.2012] (v) New clause (viii) to rule 6(6) inserted
The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable where the excisable goods removed without payment of duty are the supplies made for setting up of solar power generation projects or facilities [Clause (viii) to rule 6(6)]. [Notification No. 25/2012-CE (NT) dated 08.05.2012] (vi) Sub-rule (6A) substituted with new sub-rules (7) and (8) Before amendment At present, the provisions of sub-rules (1), (2), (3) and (4) are not applicable in case the taxable services are provided, without payment of service tax, to a Unit in a Special Economic Zone (SEZ) or to a Developer of a Special Economic Zone for their authorised operations. After Amendment The aforesaid relaxation has also been extended in case where a service is exported. For the purpose of this rule, a service provided or agreed to be provided shall not be an exempted service when:(a) the service satisfies the conditions specified under rule 6A of the Service Tax Rules, 1994 and the payment for the service is to be received in convertible foreign currency; and (b) such payment has not been received for a period of six months or such extended period as maybe allowed from time-to-time by the Reserve Bank of India, from the date of provision. [Notification No. 28/2012-CE (NT) dated 20.06.2012] 12. Revised manner of distribution of credit by input service distributor [Rule 7]
Rule 7 has been substituted with a new rule which provides as follows:The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely: (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; (b) credit of service tax attributable to service used in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed; (c) credit of service tax attributable to service used wholly in a unit shall be distributed only to that unit; and (d) credit of service tax attributable to service used in more than one unit shall be distributed pro rata on the basis of the turnover during the relevant period of the concerned unit to the sum total of the turnover of all the units to which the service relates during the same period. [Notification No. 18/2012-CE (NT) dated 17.03.2012 as amended by Notification No. 28/2012-CE (NT) dated 20.06.2012] 13. Credit availment allowed on the tax payment challan in case of payment of service tax by ALL service receivers on reverse charge [Rule 9(1)(e)] Before Amendment Earlier rule 9(1)(e) provided that the CENVAT credit may be taken by the manufacturer or the provider of output service or input service distributor on the basis of a challan evidencing payment of service tax by
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1. Option to authorize job-worker to pay duty in case of readymade garments and made-up articles of textiles withdrawn [Rule 4(1A)] [Notification No. 19/2011 CE (NT) dated 28.07.2011] In the garment and made up industry, goods are being manufactured from several job- workers. The person getting the goods manufactured on his behalf may or may not, himself, possess any manufacturing facility. Central Excise Rules were amended to incorporate sub-rule (1A) in rule 4 vide Notification No. 4/2011 CE (NT) dated 01.03.2011 to prescribe that in case of readymade garments and made-up articles of textiles falling under Chapter 61 or 62 or 63 of the First Schedule to the Tariff Act, the liability to pay duty and comply with central excise procedures would be on the person on whose behalf the goods are manufactured by job- workers. Alternatively, an option was given to merchant manufacturer to authorize the job-worker to obtain registration and comply with all formalities of Central Excise including payment of duty. Sub-rule (1A) has been further amended to withdraw the option available to merchant manufacturer to authorize the job-worker to pay duty and comply with all the procedures. Therefore, now only the merchant manufacturer can pay duty in such cases. In a case where any merchant manufacturer has already authorized its job-worker to pay the duty under the provisions of sub-rule (1A) as it stood prior to the publication of this notification, he will have to obtain registration and comply with other related provisions within a period of 30 days from 28.07.2011. 2. Rule 12AA of the CENVAT Credit Rules, 2004 renumbered as 12AAA and rule 12CC of the Central Excise Rules, 2002 renumbered as 12CCC [Notification No. 3& 4/2012-CE (NT) both dated 12.02.2012] Rule 12AA of the CENVAT Credit Rules, 2004 empowering Central Government to impose restriction on utilization of CENVAT credit in certain type of case has been substituted with the new rule 12AAA. The provisions of the erstwhile rule 12AA and new rule 12AAA are same. Further, rule 12CC of the Central Excise Rules, 2002 empowering Central Government to impose restriction in certain type of case has been substituted with the new rule 12CCC. The provisions of the erstwhile rule 12CC and new rule 12CCC are same. Facilities to be withdrawn and restrictions to be imposed in certain types of cases for manufacturer, first stage and second stage dealer or exporter Consequently, Notification No. 32/2006-CE (NT) dated 30.12.2006 issued under erstwhile rules has also been superseded by Notification No. 5/2012-CE (NT) dated 12.03.2012. 3. Option available to job-worker to pay duty and comply with all the procedures in case of article of jewellery or other articles of precious metals withdrawn [Rule 12AA of the Central Excise Rules, 2002] [Notification No. 8/2012-CE (NT) dated 17.03.2012] As per rule 12AA of the Central Excise Rules, 2002, in case of article of jewellery or other articles of precious metals falling under Heading 7113 or 7114 manufactured on job-work basis, merchant manufacturer would obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee. However, proviso to sub-rule (1) to rule 12AA provided an option available to job-worker to pay duty and comply with all the procedures. However, now proviso to sub-rule (1) to rule 12AA has been omitted to withdraw the option available to job-worker to pay duty and comply with all the procedures. Therefore, now only the merchant manufacturer can pay duty in such cases. Further, explanation 2 to rule 12AA explaining the meaning of article of jewellery has also been omitted.
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Before Amendment Where an assessee is availing the exemption under Notification No. 1/2011-CE dated 01.03.2011 and does not manufacture any other excisable goods, he shall file a quarterly return in the specified form, of production and removal of goods and other relevant particulars, within 10 days after the close of the quarter to which the return relates [Fourth proviso to rule 12(1)]. After Amendment Fourth proviso to rule 12(1) has been amended to extend the aforesaid relaxation of filing the quarterly return to an assessee availing exemption in respect of goods falling under Sl.No.67, 128, 199(I) and 200(I) [mentioned below], of Notification No. 12/2012-CE dated 17.03.2012. S. No. 67 128 199(I) 200(I) Particulars Coal, briquettes, ovoids and similar solid fuels manufactured from coal All goods mentioned in Chapter 31 (fertilizers), other than those which are clearly not to be used as fertilisers Articles of jewellery under heading 7113 Articles of goldsmiths or silversmiths wares of precious metal or of metal clad with precious metal, bearing a brand name under heading 7114
7. E-Filing of Excise Returns and Statements mandatory for all assesses [Notification No. 21 & 22/2011 CE (NT) both dated 14.09.2011] Central Excise Rules, 2002 have been amended to provide that the returns and statements prescribed under rule 12 will have to be filed electronically by all the assessees irrespective of the duty paid in the preceding year. Monthly Return for production and removal of goods (ER-1), Quarterly Return (ER-3), Annual Financial Information Statement (ER-4) are some of the returns and statements prescribed under Rule 12.
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1. CBEC notifies new Form ER 1 and ER-3 The Central Board of Excise and Customs has notified new Form ER-1 and Form ER-3. Form ER-1 is the monthly return for production and removal of goods and other relevant particulars and CENVAT credit. Form ER-3 is the quarterly return for production and removal of goods and other relevant particulars and CENVAT credit, by an assessee eligible to avail of the exemption under a notification based on the value of clearances in a financial year. The new forms have been effective from 1 st October, 2011. SSI unit is required to file return in Form ER-3 for the quarter beginning from the 1st October, 2011 and ending with the 31st December, 2011. [Notification No. 16/2011- CE (NT) dated 18.07.2011 as amended by Notification No. 20/2011 CE (NT) dated 13.09.2011 & Notification No. 31/2011-CE (NT) dated 30.12.2011 and Notification No. 12/2012-CE (NT) dated 17.03.2012] 2. Application for registering a new factory after opting as large taxpayer to be made to Assistant Commissioner /Deputy Commissioner in place of Chief Commissioner [Notification No. 17/2011- CE (NT) dated 18.07.2011] Notification No. 20/2006 - CE (N.T.) dated 30.09.2006 specifies the conditions to be satisfied and procedures to be followed by a person to be eligible to opt as large taxpayer. One of the conditions laid down by the said notification provided that where a new factory or service provider, input credit distributor or first or second stage dealer becomes liable to be registered, after opting as large taxpayer, the application for such new registration ought to be made before the Chief Commissioner of Central Excise, Large Taxpayer Unit. The said condition has been amended so as to enable the submission of applications of such new registrations before the Assistant Commissioner /Deputy Commissioner of Central Excise, Large Taxpayer Unit, in case of registration under the Central Excise Act, 1944 and the Superintendent, Large Taxpayer Unit, in case of registration under the service tax, as the case may be. 3. Export procedures for Nepal amended [Notifications Nos. 24-29 CE (NT) all dated 05.12.2011 and Notification No. 02/2012- CE(NT) dated 22.02.2012] With effect from 01.03.2012, the procedures prescribed for export under claim for rebate vide Notification No. 19/2004 CE (NT) dated 06.09.2004 and export without payment of duty under bond vide Notifications Nos. 42 to 44/2001 CE (NT) all dated 26.06.2001 would apply to Nepal as well. This has been done in view of the revised treaty between India and Nepal. CBEC has issued Notifications Nos. 24-29 CE (NT) all dated 05.12.2011 to give effect to this amendment. As per the earlier provisions, procedures prescribed for export under claim for rebate vide Notification No. 19/2004 CE (NT) dated 06.09.2004 and export without payment of duty under bond vide Notifications Nos. 42 to 44/2001 CE (NT) all dated 26.06.2001 applied to countries other than Nepal and Bhutan. For Nepal and Bhutan separate procedures were prescribed for export under claim for rebate vide Notification No. 20/2004 CE (NT) dated 06.09.2004 and export without payment of duty under bond vide Notification No. 45/2001 CE (NT) dated 26.06.2001.
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Finance Act, 2011 had substituted erstwhile sections 11AA and 11AB with a new section 11AA. Hence, reference to erstwhile section 11AB at the following places has been replaced with section 11AA:S.No. Rules/Notification No.s Rule 8(3) Rule 8A(3) 1. Central Excise Rules, 2002 Rule 12BB Rule 7(4) 2. Central Excise (Removal of Goods at Concessional Rule 6 Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 Notification No. 45/2001-CE (NT) dated 26.06.2001 Notification No. 31/2007-CE (NT) dated 02.08.2007 Notification No. 42/2001-CE (NT) dated 26.06.2001
3. 4. 5.
[Notification No. 8,13,14,15 & 16/2012-CE (NT) all dated 17.03.2012 & Notification No.22/2012-CE (N.T.) dated 30.03.2012] 5. In respect of goods received at concessional rate of duty, instead of monthly return quarterly return needs to be filed [Notification No. 13/2012-CE (NT) dated 17.03.2012] Rule 5 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 has been amended to, inter alia, provide that the manufacturer, receiving subject goods, shall submit a quarterly return instead of a monthly return.
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As per section 66, the charging section under earlier regime, rate of service tax was 12% of the value of taxable services. However, the rate of service tax was reduced to 10% vide Notification No. 8/2009 ST dated 24.02.2009. With effect from 01.04.2012, Notification No. 02/2012-ST dated 17.03.2012 rescinded the said notification and the rate of service tax was restored to 12% for the period between 01.04.2012 to 30.06.2012. With effect from 01.07.2012, new charging section, section 66B has come into effect. The rate of service tax is 12% as per the new charging section also. 2. Rescission of the earlier Notifications
With the introduction of negative list approach of taxation of services, a large number of earlier notifications which were either not in line with the new provisions or which have been subsumed in mega exemption or abatement notification or a new notification has been issued, have been rescinded vide Notification No. 34/2012-ST dated 20.06.2012. 3. Refund of service tax paid on the services used in the export of the goods
With the introduction of the negative list approach with effect from July 1, 2012, notifications granting exemption to the exporters of goods have also been suitably amended as under: A. Notification No. 18/2009-ST dated 07.07.2009 rescinded-Refund of service tax where service tax is paid by exporter under reverse charge mechanism Notification No. 18/2009-ST dated 07.07.2009, providing exemption to the Goods Transport Agency service and Foreign Commission Agent service received by exporters and used in export of goods, has been rescinded by Notification No. 31/2012 dated 20.06.2012 . Further,Notification No.42/2012-ST dated 29.06.2012 has been issued. The exemption which was earlier available to both goods transport agency service and the foreign commission agent service used for export of goods under the same Notification (NN 18/2009) has now been provided under two separate notifications. NN 31/2012 provides exemption to goods transport agency service and NN 42/2012 provides exemption to foreign commission agent service. B. Notification No. 17/2009-ST dated 07.07.2009 rescinded-Rebate of service tax paid on specified services used in the export of goods With effect from 03.01.2012, the old procedure for grant of refund prescribed vide Notification 17/2009-ST dated 07.07.2009 was dispensed with and a new scheme for refund of the service tax paid on the services received by an exporter and used for export of goods was prescribed vide Notification No. 52/2011 dated 30.12.2011. Under the simplified scheme, the exporters were provided with an option to claim refund electronically through ICES scheme. Otherwise, they could claim refund on the basis of documents. Refund, however, continued to be restricted to specified 18 taxable services as before. With the advent of the negative list approach and section 65 ceasing to exist, Notification No. 52/2011 dated 30.12.2011 has also been superseded vide Notification No. 41/2012 dated 29.06.2012 thereby omitting the reference to various sub-clauses of erstwhile section 65(105). The provisions of new rebate scheme, effective from 01.07.2012, have been enumerated below:-
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4. Small service providers (SSP) exemption Before Amendment Earlier, Notification No. 6/2005-ST dated 01.03.2005 granted exemption to a small service provider who provided taxable services not exceeding ` 10 lakh in the preceding financial year. Hence, where the aggregate value of taxable services provided by a service provider did not exceed ` 10 lakhs in the previous financial year, the concerned service provider was not required to pay service tax upto aggregate value not exceeding ` 10 lakh in the current financial year. After Amendment- Notification No. 33/2012 ST dated 20.06.2012 With effect from 01.07.2012, the aforesaid notification has been rescinded and a new notification grating exemption to small service providers has been issued to align it with the concept of negative list approach. Central Government has exempted the taxable services of aggregate value not exceeding `10 lakh in any financial year from the whole of the service tax leviable thereon under section 66B of the Finance Act, 1994 in case the aggregate value of taxable services rendered by the service provider from one or more premises, does not exceed ` 10 lakh in the preceding financial year. 5. MEGA EXEMPTION NOTIFICATION With effect from 01.07.2012, Notification No. 25/2012-ST dated 20.06.2012 grants exemption from service tax to the following taxable services:1.Services provided to the United Nations or a specified international organization. 2.Health care services by a clinical establishment, an authorized medical practitioner or para-medics. 3.Services by a veterinary clinic in relation to health care of animals or birds. 4.Services by an entity registered under section 12AA of the Income tax Act, 1961 by way of charitable activities. 5.Services by a person by way of(a) (b) renting of precincts of a religious place meant for general public; or conduct of any religious ceremony.
(i)any person other than a business entity; or (ii)a business entity with a turnover up to ` 10 lakh in the preceding financial year; (b)an individual as an advocate or a partnership firm of advocates by way of legal services to,(i)an advocate or partnership firm of advocates providing legal services ; (ii)any person other than a business entity; or (iii) a business entity with a turnover up to ` 10 lakh in the preceding financial year; or (c)a person represented on an arbitral tribunal to an arbitral tribunal.
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(b) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; (c)defence or military equipments; (d)postal mail or mail bags; (e)household effects; (f)newspaper or magazines registered with the Registrar of Newspapers; (g)railway equipments or materials; (h)agricultural produce; (i) foodstuff including flours, tea, coffee, jaggery, sugar, milk products, salt and edible oil, excluding alcoholic beverages; or (j)chemical fertilizer and oilcakes;
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(b) a period of three years has not been elapsed from the date of entering into an agreement as an incubate. 28. Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution (a)as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of service tax; or (c) up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex. 29. Services by the following persons in respective capacities (a)sub-broker or an authorised person to a stock broker; (b)authorised person to a member of a commodity exchange; (c)mutual fund agent to a mutual fund or asset management company; (d)distributor to a mutual fund or asset management company; (e)selling or marketing agent of lottery tickets to a distributer or a selling agent; (f)selling agent or a distributer of SIM cards or recharge coupon vouchers; (g) business facilitator or a business correspondent to a banking company or an insurance company, in a rural area; or (h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt. 30. Carrying out an intermediate production process as job work in relation to (a)agriculture, printing or textile processing; (b) cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985; (c)any goods on which appropriate duty is payable by the principal manufacturer; or (d) processes of electroplating, zinc plating, anodizing, heat treatment, powder coating, painting including spray painting or auto black,during the course of manufacture of parts of cycles or sewing machines upto an aggregate value of taxable service of the specified processes of ` 150 lakh in a financial year subject to the condition that such aggregate value had not exceeded ` 150 lakh rupees during the preceding financial year. 31. Services by an organizer to any person in respect of a business exhibition held outside India.
32. Services by way of making telephone calls from (a)departmentally run public telephone; (b)guaranteed public telephone operating only for local calls; or (c)free telephone at airport and hospital where no bills are being issued. 33. Services by way of slaughtering of bovine animals. 34. Services received from a provider of service located in a non- taxable territory by (a)Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession; (b)an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or (c)a person located in a non-taxable territory.
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Earlier, the abatement in respect of various taxable services was provided vide Notification No. 01/2006-ST dated 01.03.2006, Notification No. 09/2010-ST dated 27.02.2010 and Notification No. 06/2012-ST dated 17.03.2012. The said notifications have been rescinded. With effect from 01.07.2012 , following taxable services are eligible for abatement from the gross amount in the following manner:S.No. Description of taxable service Percentage Conditions of abatement 90 Nil. 70 Nil. 70 Nil.
1 2 3
Services in relation to financial leasing including hire purchase Transport of goods by rail Transport of passengers, with or without accompanied belongings by rail. Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises.
30 CENVAT credit on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985 used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
60 CENVAT credit on inputs and capital goods, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.
40 Same as above.
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8 9 10 11
Services provided in relation to chit Renting of any motor designed to carry passengers Transport of goods in a vessel Services by a tour relation to,(i) a package tour operator vehicle
(ii) a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour.
90 (i) CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004.
(ii)The invoice, bill or challan issued indicates that it is towards the charges for such accommodation. (iii) This exemption shall not apply in such cases where the invoice, bill or challanissued by the tour operator, in relation to a tour, only includes the service charges for arranging or booking accommodation for any person and does not include the cost of such accommodation.
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12.
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly except where entire consideration is received after issuance of completion certificate by the competent authority.
75 (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii)The value of land is included in the amount charged from the service receiver.
7. Deduction of Research and development cess payable on import of technology allowed from service tax subject to specified conditions being fulfilled [Notification No.14/2012 ST dated 17.03.2012] With effect from 01.07.2012, the amount of Research and development cess payable shall be allowed as a deduction from the service tax payable on the taxable service involving the import of technology. Conditions to be fulfilled:(a) The Research & Development Cess is paid at the time or before payment for the service subject to maximum of 6 months period from the date of invoice *. *In case of associated enterprises, the date of credit in the books of account. (b) Necessary records will have to be maintained so as to establish a linkage between the invoice or the credit entry (as the case may be) and the cess payment challan. 8. Exemption to services for use of foreign Diplomatic Mission/consular post in India or family members of diplomatic agents or career consular officers posted therein Before Amendment Earlier, exemption to services provided for the official use of a foreign diplomatic mission or consular post in India, or for personal use/for the use of the family members of diplomatic agents or career consular officers posted therein was granted by Notification No. 33 & 34/2007-ST both dated 23-05-2007. With the introduction of the negative list, these notifications have been rescinded. After Amendment With effect from 01.07.2012, the exemption to the aforesaid persons is granted by Notification No. 27/2012-ST dated 20.06.2012. The provisions of the erstwhile and the new notification are largely the same. As per the new notification, following services are exempt from service tax:(i) Exemption on services provided to foreign diplomatic missions or consular posts in India for their official use. (ii) Exemption on services provided for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein. The Notification also prescribes the procedure for availing the said exemption.
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Where the specified services received by Unit or Developer, are not wholly consumed within SEZ, i.e., shared between authorised operations in SEZ Unit and Domestic Tariff Area (DTA) Unit, maximum refund shall be restricted to the extent of the ratio of export turnover of goods and services multiplied by the
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With effect from 01.07.2012, optional composition scheme under works contract has been dispensed with and consequently, notification issuing Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 has been rescinded vide Notification No. 35/2012-ST dated 20.06.2012 . C. AMENDMENTS IN THE SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006
The amendments in the Service Tax (Determination of Value) Rules, 2006 have been made vide Notification No. 24/2012 dated 06.06.2012 effective from 01.07.2012. 1. More comprehensive manner of determination execution of a works contract prescribed [Rule 2A] of value of service portion in the
Works contract is a contract for the provision of service as well as supply of materials. As decided by Apex Court in BSNL v. UOI 2006 (2) S.T.R. 161 (S.C.), a works contract can be segregated into a contract of sale of goods and contract of provision of service. With a view to bring certainty and simplicity, the manner of determining the value of service portion in works contracts was provided in the erstwhile rule 2A of the Service Tax (Determination of Value) Rules, 2006. In order to align this rule with the new system of taxation of services based on the negative list, the erstwhile rule 2A has been replaced by a new rule 2A which provides as follows:-. Subject to the provisions of section 67, the value of service portion in the execution of a works contract shall be determined in the following manner, namely:A. Determination of value on the basis of value of transfer of property in goods transferred, adopted for State VAT purposes Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Particulars Gross amount charged for the works contract Amount (` ) xxxx
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**Note: Value of transfer of property in goods involved in the execution of the said works contract in case VAT/sales tax is paid/payable on their actual value Where VAT/sales tax has been paid/payable on the actual value of property in goods transferred in the execution of the works contract (and not using standard rate of deduction) then, such value adopted for the purposes of payment of VAT/sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause. Inclusions Value of works contract service shall include (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architects fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services. B. Simplified scheme for determining the value of service portion in a works contract Where the value has not been determined as per the aforementioned method, the person liable to pay tax on the taxable service involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:S.No. In case of Value of service portion shall be ______ of the total amount charged for the works contract 40% 70%
1. 2.
works contracts entered into for execution of original works works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods other works contracts, not covered under in above two cases, including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable property
3.
60%
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xxxx xxxx
3. It is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. 2. Valuation of money changing service-Rule 2B amended With the introduction of negative list of services, provisions of section 65 have ceased to exist. Therefore, the reference to sub-clauses (zm) and (zzk) of clause (105) of section 65 has been removed from rule 2B. 3. Determination of value of service portion involved in supply of food or any other article of human consumption or any drink in a restaurant or as outdoor catering [Rule 2C inserted] Subject to the provisions of section 67, the value of service portion, in an activity wherein goods being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity at a restaurant or as outdoor catering, shall be the specified percentage of the total amount charged for such supply, in terms of the following table, namely:S.No. Description Value of taxable service shall ____ of the total amount be
1.
Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity, at a restaurant
40%
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1. Particulars
Gross amount charged Add: Value of all goods and services FMV of all goods & services supplied in or in relation to the supply of supplied by the service food or any other article of human receiver (determined in consumption or any drink (whether or not accordance with the generally intoxicating), whether or not supplied accepted accounting principles) under the same contract or any other contract Less: xxxx (i) the amount charged for such goods or services, if any, by the service receiver; and xxxx (ii) VAT/sales levied thereon Total Amount tax, if any,
xxxx xxxx
2.It is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central Excise Tariff Act, 1985. 4. Rule 3 relating to manner of determination of value amended Before Amendment Earlier in rule 3, prescribed manner provided for determination of the value of taxable service was inadvertently made applicable to the situation where the consideration received is not wholly or partly consisting of money. However, such a situation was fully covered by section 67(2) of the Finance Act, 1994. After Amendment Consequently, rule 3 has been suitably amended. Hence, now the prescribed manner for determination of the value of taxable service is applicable only in a situation where such value is not ascertainable. 5. Reference to section 65(105)(zzzx) substituted by the words telecommunication service With the introduction of negative list of services, provisions of section 65 have ceased to exist. Therefore, the reference to sub-clauses (zzzx) of clause (105) of section 65 has been substituted with the telecommunication service. 6. Amendments in rule 6 relating to cases in which the commission, costs, etc., will be included or excluded (a) Sub-rule (1)-Inclusions to taxable value-Clause (x) inserted
Clause (x) has been inserted in sub-rule (1) which provides as follows:-
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Service Tax Rules, 1994 have been amended to provide that every assessee will have to submit half-yearly service tax return electronically, irrespective of the amount of service tax paid by him in the preceding financial year. The amendment has been made effective from October 1, 2011. Earlier, electronic filing of service tax returns was mandatory for the assessees who had paid service tax of ` 10 lakh or more including the amount of service tax paid by utilization of CENVAT credit in the preceding financial year. [Notification No. 43/2011 ST dated 25.08.2011] Procedure for electronic filing of Central Excise and Service Tax returns and for electronic payment of excise duty and service tax Central Excise and Service Tax returns, the DG (Systems) has issued comprehensive instructions outlining the procedure for electronic filing of Central Excise duty and Service Tax returns and electronic payment of taxes under ACES. The said instructions outline the registration process for new assessees, existing assessees, non assessees and for Large Taxpayers Units, steps for preparing and filing of return, use of XML Schema for filing dealers return, procedure for obtaining acknowledgement of e-filed return, procedure for e-payment etc. [Circular No. 956/17/2011 CX dated 28.09.2011] 2. 01.04.2012) (a) Amendments made by Notification No. 3/2012-ST dated 17.03.2012 (effective from
Rule 2(cd) defines partnership firm as follows:Partnership firm includes limited liability partnership. (b) Amendments in rule 4A
(i)Time limit for issue of invoice/ bill/ challan raised to 30 days [Sub-rule (1)] Before Amendment Earlier, under rule 4A(1), an invoice has to be issued within 14 days from the date of:(i) completion of such taxable service or (ii) receipt of any payment towards the value of such taxable service whichever is earlier. After Amendment Rule 4A(1) has been amended to increase the time-limit for issuance of invoice from 14 days to 30 days. (ii) Invoice to be issued within 45 days in case of banking and other financial institution including NBFC [Fourth proviso to rule 4A inserted*] The time-limit for issuance of invoice, bill or challan, as the case may be, shall be 45 days in case where the service provider is: (i)A banking company (ii) A financial institution including a non-banking financial company providing service in relation to any person. (*as amended by Notification No. 36/2012 dated 20.06.2012)
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(i) Individuals/partnership firms with aggregate value of taxable services of ` 50 lakh or less in previous year allowed to pay service tax on payment basis in current year upto a total of ` 50 lakh [Fourth proviso to sub-rule (1) inserted] In case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is ` 50 lakh or less in the previous financial year, the due dates for payment of service tax on taxable services provided or agreed to be provided by him up to a total of ` 50 lakh in the current financial year, at the option of service provider, is as follows:S.No. 1. Particulars Due date for payment of service tax
If the service tax is paid 6 th day of the following quarter in which electronically through internet the payment is received banking In any other case 5 th day of the following quarter in which the payment is received
2. 3.
In the case payment is 31 st day of March received in the quarter ending in March
(ii) Restrictions in rule 6(4B) omitted thereby allowing unlimited amount of permissible adjustment of excess service tax paid Before Amendment Earlier the excess amount of service tax paid on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification was allowed subject to the following conditions:(a) The excess payment shall be utilized for the payment of service tax for the subsequent month liability subject to maximum of ` 2,00,000/- for a relevant month or quarter, as the case may be. (b) The excess amount paid by a registered assessee, on account of delayed receipt of details of payments towards taxable services may be adjusted without monetary limit. (c) The adjustment shall be intimated to the jurisdictional superintendent of Central Excise within 15 days from such adjustment. After Amendment All the three aforesaid conditions [mentioned in point (a) to (c) above] have now been dispensed with. Consequently, sub-rule (4B) now provides as under:The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, valuation or applicability of any exemption notification. (iii) A. Changes in the composition rates In case of insurer carrying on life insurance business [Sub-rule (7A)]
Where amount of the gross premium allocated for investment or savings on behalf of policy holder is not intimated to the policy holder at the time of providing of service:-
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For an amount
Rate of service tax Prior to amendment (Till 31.03.2012) After amendment (With effect from 01.04.2012)
1.
Upto 100,000
` 0.1 % of the gross amount of 0.12 % of the gross amount of currency exchanged currency exchanged or or ` 25 whichever is higher ` 30 whichever is higher
2.
Exceeding ` 100 + 0.05 % of the gross ` 120 + 0.06 % of the gross amount ` 1,00,000 and amount of currency exchanged of currency exchanged upto ` 10,00,000 Exceeding ` 10,00,000 ` 550 + 0.01 % of the gross ` 660 + 0.012 % of the gross amount amount of currency exchanged of currency exchanged or or ` 5,000 whichever is lower ` 6,000 whichever is lower
3.
C.
In case of Distributor or Selling Agents of Lotteries [Sub-rule (7C)] : Guaranteed lottery prize payout Amount of service tax payable on every ` 10 Lakh (or part of ` 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw Prior to amendment (Till 31.03.2012) More 80% than ` 6000/-. `9000/After amendment (With effect 01.04.2012) ` 7000/` 11000/from
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(i) Banking company: Banking company means a banking company as defined in section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and any other financial institution notified by the Central Government in this behalf [Sub-clause (bb)]. (ii)Body corporate: includes a company incorporated outside India but does not include(a) a corporation sole;
(b) a co-operative society registered under any law relating to co-operative societies; and (c) any other body corporate (not being a company as defined in this Act) which the Central Government may, by notification in the Official Gazette, specify in this behalf [Sub-clause (bc)]. (iii) Financial institution: Financial institution means any non-banking institution which carries on as its business or part of its business any of the following activities, namely: (i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own: (ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities of a like nature: (iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972: (iv) the carrying on of any class of insurance business; (v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto; (vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lumpsum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person, but does not include any institution, which carries on as its principal business, (a) agricultural operations; or (aa) industrial activity; or (b) the purchase or sale of any goods (other than securities) or the providing of any services; or
(c) the purchase, construction or sale of immovable property, so however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons [Sub-clause (bd)]. (iv) Goods carriage: Goods carriage means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods [Sub-clause (c1a)]. (v) Insurance agent: Insurance agent means an insurance agent licensed under Section 42 of the Insurance Act, 1938 who receives agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business including business relating to the continuance,
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Similarly, the said relaxation has also been so restricted in the aforesaid manner in case of the input service distributor. (iii) Fifth proviso to sub-rule (1) substituted with a new proviso Earlier, the relaxation that invoice would include ticket in any form by whatever name called and it may not contain the registration number of the service provider and service recipient was available in case of service of transport of passengers by air. Now the said relaxation has been extended in case of service of transport of passengers by any mode of transport. (d) New rule 6A relating to the export of services inserted (i) (1)]:Conditions to be fulfilled for service to be treated as export of service [Sub-rule
The provision of any service provided or agreed to be provided shall be treated as export of service when,(a) the service provider is located in the taxable territory, (b) the service receiver is located outside India and the place of provision of the service is outside India, (c) the service is not a service specified in the negative list (Section 66D) of the Act, (d) the payment for such service has been received by the service provider in convertible foreign exchange, and
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2. Duty on the inputs/service tax on input services, rebate of which has been claimed, has been paid to the supplier/service provider respectively. If the exporter himself is liable to pay for any input services; he should have paid the service tax and cess to the Central Government. 3. No CENVAT credit has been availed of on inputs and input services on which rebate has been claimed. 4. In case any of the aforesaid conditions is not fulfilled, rebate paid, if any, shall be recoverable with interest in accordance with the provisions of section 73 and section 75 of the Finance Act, 1994. 5. Amount of rebate claimed is not less than ` 1,000.
The Notification also prescribes the procedure for claiming the rebate on inputs and input services. (f) Other changes S.No. 1. 2. 3. 4. 5. 6. 7. Rule 4(1) 5(2)(i) 5B 6(7) 6(7A) 6(7B) 6(7C) Amendment Reference to erstwhile charging section 66 has been substituted with the new charging section 66B. Sub-clause (a) has been substituted with the following sub-clause:(a) providing of any service Rule 5B has been omitted. Reference to erstwhile charging section 66 has been substituted with the new charging section 66B. Reference to erstwhile charging section 66 has been substituted with the new charging section 66B. Reference to erstwhile sub-clauses section 65 has been omitted. (zm) and (zzk) of clause (105) of
Reference to erstwhile sub-clause (zzzzn) of clause (105) of section 65 of the said Act has been omitted.
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CLARIFICATION 1. Service to be treated as completed on completion of all the auxiliary activities enabling the service provider to issue the invoice CBEC has clarified that the test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. The Service Tax Rules, 1994 require that invoice should be issued within a period of 30 days from the completion of the taxable service. The invoice needs to indicate inter alia the value of service so completed. Thus, it is important to identify the service so completed. This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities like measurement, quality testing etc. which may be essential pre-requisites for identification of completion of service. However, it has been clarified that such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice. The Board has elucidated that the above interpretation also applies to determination of the date of completion of provision of service in case of continuous supply of service. [Circular No. 144/13/2011- ST dated 18.07.2011] AMENDMENTS 1. Date of payment [Rule 2A] [Effective from 01.04.2012]
Rule 2A has been inserted to define the date of payment. For the purposes of these rules, date of payment shall be:(a) date on which the payment is entered in the books of accounts or (b) date on which payment is credited to the bank account of the person liable to pay tax whichever is earlier. (A) Date of payment in case of change in effective rate of tax or a new levy between the above two dates In case, (i) there is a change in effective rate of tax or when a service is taxed for the first time during the period between such entry in books of accounts and its credit in the bank account; (ii) the bank account is credited after four working days from the date when there is change in effective rate of tax or a service is taxed for the first time; and (iii) the payment is made by way of an instrument which is credited to a bank account, the date of payment shall be the date of credit in the bank account instead of the date of recording of payment in the books of accounts. Analysis Since rate of service tax has been changed from 10% to 12% with effect from 01.04.2012, (i) In case where service has been provided before 01.04.2012 and the cheque / demand draft etc. has been received upto March 31, 2012, applicable rate of service tax would be 10% provided cheque / demand draft is credited in the bank account by April 5, 2012. Otherwise, the date of payment would be date of credit in the bank account [viz. after April 5, 2012] and consequently, new rate of 12% would be applicable. (ii) In case where date of issuance of invoice and receipt of payment by cheque / demand draft etc. is received before 01.04.2012, applicable rate of service tax would be 10% provided cheque / demand draft etc. is credited in the bank account by April 5, 2012. Otherwise, the date of payment would be date of credit in the bank account [viz. after April 5, 2012] and consequently, new rate of 12% would be applicable.
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Before Amendment Earlier, rule 7 provided that in the following cases, subject to specified conditions, payment of consideration would be the point of taxation:(a) (b) Person liable to pay service tax under reverse charge mechanism Services covered by rule 3(1) of the Export of Services Rules, 2005 date of receipt or
(c) Individuals or proprietary firms or partnership firms providing the eight specified services** Further, in case of associated enterprises , where the person providing the service is located outside India, the point of taxation shall be:(a) the date of credit in the books of account of the person receiving the service or (b) date of making the payment whichever is earlier. After Amendment Category (b) has been omitted now. Further, the benefit of payment of service tax on receipt basis earlier provided to eight specified services has also been withdrawn. However, in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is ` 50 lakh or less in the previous financial year, service tax on taxable services provided or to be provided by him up to a total of ` 50 lakh in the current financial year is payable on receipt basis (provided in Service Tax Rules, 1994). New rule 7 reads as under:Notwithstanding anything contained in these rules, the point of taxation in respect of the persons required to pay tax as recipients of service under the rules made in this regard in respect of services notified under subsection (2) of section 68 of the Act, shall be the date on which payment is made: However, where the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist. Outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier. **Note: CBEC vide Circular No. 154/5/ 2012 ST dated 28.03.2012 has clarified that, in respect of the specified eight services, for invoices issued on or before 31st March 2012, the point of taxation shall be the date of payment. Further, Board has clarified vide Circular No. 158/9/2012-ST dated 08.05.2012 that the rate of service tax prevalent on the date when point of taxation occurs is the rate of service tax applicable on any taxable service. Therefore, in the abovementioned cases where the point of taxation is the date of payment, service tax should be charged @ 12% on these services, if the payment is received on or after 1st April, 2012 even though the invoices have been issued before 1st April, 2012. Further, the supplementary invoices may be issued to reflect the new rate of tax, if required to recover the differential amount and that CENVAT credit can be availed on such supplementary invoices and tax payment challans (in case of reverse charge). [Notification No. 04/2012-ST dated 17.03.2012] 6. Determination of point of taxation in other cases [Rule 8A inserted] [Effective from 01.04.2012]
A residual rule-rule 8A has been inserted to determine the point of taxation by way of best judgment to handle situations where the tax-payer is unable to furnish one or more of the details needed i.e. date of payment or date of invoice or both to determine point of taxation. It provides as follows:Where the point of taxation cannot be determined as per these rules as the date of invoice or the date of payment or both are not available, the Central Excise officer, may, require the concerned person to
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A number of changes have been made in the reverse charge provisions. In three of services namely hiring of means of transport, works contract and man power supply, both service receivers and service providers have been made liable to pay service tax in the prescribed percentages. In few other services, service receiver has been made liable to pay the entire service tax. Section 68(2) of the Finance Act, 1994 has been suitably amended by the Finance Act, 2012 whereby a proviso has been added to the said section authorising Central Government to notify the service and extent of service tax payable each by the service provider and service receiver. In view of the above amendment, Notification No. 30/2012 dated 20.06.2012 has been issued which provides as follows: Services where entire service tax is payable by the service receiver:1.Insurance agent services: The taxable services provided or agreed to be provided by an insurance agent to any person carrying on the insurance business; 2.Goods transport agency services: The taxable services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road, where the person liable to pay freight is, (a)any factory registered under or governed by the Factories Act, 1948. (b)any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India. (c)any co-operative society established by or under any law. (d)any dealer of excisable goods, who is registered under the Central Excise Act, 1944 or the rules made thereunder. (e)anybody corporate established, by or under any law, or (f)any partnership firm whether registered or not under any law including association of persons. 3. Sponsorship services: The taxable services provided or agreed to be provided by way of sponsorship to anybody corporate or partnership firm located in the taxable territory. 4. Legal services: The taxable services provided or agreed to be provided to any business entity located in the taxable territory by,(a)an arbitral tribunal, or (b)an individual advocate or a firm of advocates by way of support services, or (c)Government or local authority by way of support services excluding,(i)renting of immovable property, and (ii)services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994.
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In respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory
in respect of services provided or agreed to be provided by way of supply of manpower for any purpose by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory
25%
75 %
in respect of services provided or agreed to be provided in service portion in execution of works contract by any individual/HUF/partnership firm (whether registered or not) including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory
50%
50%
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Rule 3- Location of the Receiver (1) What is the implication of this Rule? The main rule or the default rule provides that a service shall be deemed to be provided where the receiver is located. The main rule is applied when none of the other later rules apply (by virtue of rule 14 governing the order of application of rules- see para 5.14 of this guidance paper). In other words, if a service is not covered by an exception under one of the later rules, and is consequently covered under this default rule, then the receivers location will determine whether the service is leviable to tax in the taxable territory. The principal effect of the Main Rule is that:A. Where the location of receiver of a service is in the taxable territory, such service will be deemed to be provided in the taxable territory and service tax will be payable. B. However if the receiver is located outside the taxable territory, no service tax will be payable on the said service. (2) If the place of provision of a taxable service is the location of service receiver, who is the person liable to pay tax on the transaction? Service tax is normally required to be paid by the provider of a service, except where he is located outside the taxable territory and the place of provision of service is in the taxable territory. Where the provider of a service is located outside the taxable territory, the person liable to pay service tax is the receiver of the service in the taxable territory, unless of course, the service is otherwise exempted. Following illustration will make this clear:A company ABC provides a service to a receiver PQR, both located in the taxable territory. Since the location of the receiver is in the taxable territory, the service is taxable. Service tax liability will be discharged by ABC, being the service provider and being located in taxable territory. However, if ABC were to supply the same service to a recipient DEF located in non-taxable territory, the provision of such service is not taxable, since the receiver is located outside the taxable territory.
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The proviso to this rule states as follows:Provided further that where such services are provided from a remote location by way of electronic means, the place of provision shall be the location where goods are situated at the time of provision of service. In the field of information technology, it is not uncommon to provide services in relation to tangible goods located distantly from a remote location. Thus the actual place of performance of the service could be quite different from the actual location of the tangible goods. This proviso requires that the place of provision shall be the actual location of the goods and not the place of performance, which in normal situations is one and the same. (8) What are the services that are provided to an individual which require the physical presence of the receiver with the provider for provision of the service.?- sub-rule (2) Certain services like cosmetic or plastic surgery, beauty treatment services, personal security service, health and fitness services, photography service (to individuals), internet caf service, classroom teaching, are examples of services that require the presence of the individual receiver for their provision. As would be evident from these examples, the nature of services covered here is such as are rendered in person and in the receivers physical presence. Though these are generally rendered at the service providers premises (at a cosmetic or plastic surgery clinic, or beauty parlor, or health and fitness centre, or internet caf), they could also be provided at the customers premises, or occasionally while the receiver is on the move (say, a personal security service; or a beauty treatment on board an aircraft). (9) What is the significance of ..in the physical presence of an individual, whether represented either as the service receiver or a person acting on behalf of the receiver in this rule? This implies that while a service in this category is capable of being rendered only in the presence of an individual, it will not matter if, in terms of the contractual arrangement between the provider and the receiver
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Place of provision of services provided by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational, entertainment event, or a celebration, conference, fair, exhibition, or any other similar event and of services ancillary to such admission, shall be the place where the event is held. (16) What are the services that will be covered in this category? Services in relation to admission as well as organization of events such as conventions, conferences, exhibitions, fairs, seminars, workshops, weddings, sports and cultural events are covered under this Rule. Illustration 1 A management school located in USA intends to organize a road show in Mumbai and New Delhi for prospective students. Any service provided by an event manager, or the right to entry (participation fee for prospective students, say) will be taxable in India.
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This Rule covers situations where the place of provision of a service provided in the taxable territory may be determinable to be outside the taxable territory, in terms of the application of one of the earlier Rules i.e. Rule 4 to 6, but the service provider, as well as the service receiver, are located in the taxable territory. The implication of this Rule is that in all such cases, the place of provision will be deemed to be in the taxable territory, notwithstanding the earlier rules. The presence of both the service provider and the service receiver in the taxable territory indicates that the place of consumption of the service is in the taxable territory. Services rendered, where both the provider and receiver of the service are located outside the taxable territory, are now covered by the mega exemption. Illustration A helicopter of Pawan Hans Ltd (India based) develops a technical snag in Nepal. Say, engineers are deputed by Hindustan Aeronautics Ltd, Bangalore, to undertake repairs at the site in Nepal. But for this rule, Rule 4, subrule (1) would apply in this case, and the place of provision would be Nepal i.e. outside the taxable territory. However, by application of Rule 7, since the service provider, as well as the receiver, are located in the taxable territory, the place of provision of this service will be within the taxable territory. Rule 9- Specified services- Place of provision is location of the service provider (22) What are the specified services where the place of provision is the location of the service provider? Following are the specified services where the place of provision is the location of the service provider:i) Services provided by a banking company, or a financial company, or a non-banking financial company to account holders; ii) Online information and database access or retrieval services; iii) Intermediary services; iv) Service consisting of hiring of means of transport, up to a period of one month. (23) What is the meaning of account holder? Which accounts are not covered by this rule?
Account has been defined in the rules to mean an account which bears a n interest to the depositor. Services provided to holders of demand deposits, term deposits, NRE (non-resident external) accounts and NRO (non-resident ordinary) accounts will be covered under this rule. Banking services provided to persons other than account holders will be covered under the main rule (Rule 3- location of receiver). (24) What are the services that are provided by a banking company to an account holder (holder of an account bearing interest to the depositor)? Following are examples of services that are provided by a banking company or financial institution to an account holder, in the ordinary course of business:i) services linked to or requiring opening and operation of bank accounts such as lending, deposits, safe deposit locker etc; ii) transfer of money including telegraphic transfer, mail transfer, electronic transfer etc. (25) What are the services that are not provided by a banking company or financial institution to an account holder, in the ordinary course of business, and will consequently be covered under another Rule? Following are examples of services that are generally NOT provided by a banking company or financial institution to an account holder (holder of a deposit account bearing interest), in the ordinary course of business:i) financial leasing services including equipment leasing and hire-purchase; ii)merchant banking services; iii) Securities and foreign exchange (forex) broking, and purchase or sale of foreign currency, including money changing; iv) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services;
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Generally, an intermediary is a person who arranges or facilitates a supply of goods, or a provision of service, or both, between two persons, without material alteration or further processing. Thus, an intermediary is involved with two supplies at any one time: i) the supply between the principal and the third party; and ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged. For the purpose of this rule, an intermediary in respect of goods (such as a commission agent i.e. a buying or selling agent, or a stockbroker) is excluded by definition. Also excluded from this sub-rule is a person who arranges or facilitates a provision of a service (referred to in the rules as the main service), but provides the main service on his own account. n order to determine whether a person is acting as an intermediary or not, the following factors need to be considered:Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. Separation of value: The value of an intermediarys service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as commission. Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable.
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Any service of transportation of goods, by any mode of transport (air, vessel, rail or by a goods transportation agency), is covered here. However, transportation of goods by courier or mail is not covered here. (31) What is the place of provision of a service of transportation of goods? Place of provision of a service of transportation of goods is the place of destination of goods, except in the case of services provided by a Goods Transportation Agency in respect of transportation of goods by road, in which case the place of provision is the location of the person liable to pay tax (as determined in terms of rule 2(1)(d) of Service Tax Rules, 1994 (since amended). Illustration A consignment of cut flowers is consigned from Chennai to Amsterdam. The place of provision of goods transportation service will be Amsterdam (outside India, hence not liable to service tax). Conversely, if a consignment of crystal ware is consigned from Paris to New Delhi, the place of provision will be New Delhi. (32) What does the proviso to this Rule imply?
The proviso to this Rule states as under:Provided that the place of provision of services of transportation of goods by goods transportation agency shall be the location of the person liable to pay tax. Sub-rule 2(1)(d) of Service Tax Rules, 1994 provides that where a service of transportation of goods is provided by a goods transportation agency, and the consignor or consignee is covered under any of the specified categories prescribed therein , the person liable to tax is the person who pays, or is liable to pay freight (either himself or through his agent) for the transportation of goods by road in a goods carriage. If such person is located in non-taxable territory, then the person liable to pay tax shall be the service provider. Illustration 1 A goods transportation agency ABC located in Delhi transports a consignment of new motorcycles from the factory of XYZ in Gurgaon (Haryana), to the premises of a dealer in Bhopal, Madhya Pradesh. Say, XYZ is a registered assessee and is also the person liable to pay freight and hence person liable to pay tax, in this case. Here, the place of provision of the service of transportation of goods will be the location of XYZ i.e. Haryana. Illustration 2 A goods transportation agency ABC located in Delhi transports a consignment of new motorcycles from the factory of XYZ in Gurgaon (Haryana), to the premises of a dealer in Jammu (non-taxable territory). Say, as per mutually agreed terms between ABC and XYZ, the dealer in Jammu is the person liable to pay freight. Here, in terms of amended provisions of rule 2(1)(d), since the person liable to pay freight is located in non-taxable territory, the person liable to pay tax will be ABC. Accordingly, the place of provision of the service of transportation of goods will be the location of ABC i.e. Delhi. Rule 11- Passenger Transportation Services (33) What is the place of provision of passenger transportation services? The place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. (34) What does a continuous journey mean? A continuous journey means a journey for which:(i) a single ticket has been issued for the entire journey; or (ii) more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey
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This Rule states as follows:In order to prevent double taxation or non-taxation of the provision of a service, or for the uniform application of rules, the Central Government shall have the power to notify any description of service or circumstances in which the place of provision shall be the place of effective use and enjoyment of a service. The rule is an enabling power to correct any injustice being met due to the applicability of rules in a foreign territory in a manner which is inconsistent with these rules leading to double taxation. Due to the cross border nature of many services it is also possible in certain situations to set up businesses in a non-taxable territory while the effective enjoyment, or in other words consumption, may be in taxable territory. This rule is also meant as an anti-avoidance measure where the intent of the law is sought to be defeated through ingenious practices unknown to the ordinary ways of conducting business. Rule 14- Order of application of Rules (39) What is the implication of this Rule?
Rule 14 provides that where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. This Rule covers situations where the nature of a service, or the business activities of the service provider, may be such that two or more rules may appear equally applicable. Following illustrations will make the implications of this Rule clear:-
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